<abstract xmlns="http://www.w3.org/1999/xhtml">

<p>Analyzing price competition through game theory is one of the most important frameworks of oligopoly theory, especially in industrial organizations. Numerous studies have been conducted in this direction, as companies are forced to adjust their sustainable pricing policy to operate in the long term. Thus, the players make a regular adjustment of the pricing strategy. Of all the models developed based on Bertrand’s reference model (1883), the most analyzed were those in which informational symmetry predominated. Since informational symmetry presents only a theoretical framework, economists have turned their attention to information asymmetry. This type of information best describes a complex economic game, as it creates an information gap between players and generates opportunities in the decision-making process. Thus, asymmetric information is the main parameter of the decision-making process that determines decision makers to resort to different decision strategies than those assumed by the analytical model. Any asymmetric Bertrand model predicts competitive and efficient market outcomes, a direct relationship between a firm’s conduct, market structure and finally market performance. This paper undertakes an analysis of the Bertrand model in the case of demand and asymmetric costs. We determine the Bertrand-Nash equilibrium under the scenario in which close, but not perfect substitutes exist for the differentiated product with hypothetical data. Then we highlight what happens with profits when we consider that discrete cross marginal demand gradually increases. For more research, there are numerous studies based on sequential games, Bayesian games and signaling games both in discrete time and in continuous time.</p>
</abstract>

Analyzing price competition through game theory is one of the most important frameworks of oligopoly theory, especially in industrial organizations. Numerous studies have been conducted in this direction, as companies are forced to adjust their sustainable pricing policy to operate in the long term. Thus, the players make a regular adjustment of the pricing strategy. Of all the models developed based on Bertrand’s reference model (1883), the most analyzed were those in which informational symmetry predominated. Since informational symmetry presents only a theoretical framework, economists have turned their attention to information asymmetry. This type of information best describes a complex economic game, as it creates an information gap between players and generates opportunities in the decision-making process. Thus, asymmetric information is the main parameter of the decision-making process that determines decision makers to resort to different decision strategies than those assumed by the analytical model. Any asymmetric Bertrand model predicts competitive and efficient market outcomes, a direct relationship between a firm’s conduct, market structure and finally market performance. This paper undertakes an analysis of the Bertrand model in the case of demand and asymmetric costs. We determine the Bertrand-Nash equilibrium under the scenario in which close, but not perfect substitutes exist for the differentiated product with hypothetical data. Then we highlight what happens with profits when we consider that discrete cross marginal demand gradually increases. For more research, there are numerous studies based on sequential games, Bayesian games and signaling games both in discrete time and in continuous time.

Bertrand competition under asymmetric conditions

Proceedings of the International Conference on Business Excellence

This work is licensed under the Creative Commons Attribution 4.0 International License.

{"article-title":"Bertrand competition under asymmetric conditions"}

Analyzing price competition through game theory is one of the most important frameworks of oligopoly theory, especially in industrial organizations. Numerous...

Bertrand competition under asymmetric conditions

Publié en ligne: 31 déc. 2021

Pages: 235 - 244

DOI: https://doi.org/10.2478/picbe-2021-0023

Mots clés
Bertrand Model, game theory, asymmetric information, price strategy, Nash Equilibrium

© 2021 Alexandra Vintila et al., published by Sciendo

This work is licensed under the Creative Commons Attribution 4.0 International License.

Bertrand competition under asymmetric conditions

Publié en ligne: 31 déc. 2021

Pages: 235 - 244

DOI: https://doi.org/10.2478/picbe-2021-0023

Mots clésBertrand Model, game theory, asymmetric information, price strategy, Nash Equilibrium

© 2021 Alexandra Vintila et al., published by Sciendo

This work is licensed under the Creative Commons Attribution 4.0 International License.

Mots clés
Bertrand Model, game theory, asymmetric information, price strategy, Nash Equilibrium